 QuickBooks Online 2023 Interpayroll for the second month. Get ready to start moving on up with QuickBooks Online 2023. Here we are in our Get Great Guitars practice file. We started up in a prior presentation using the 30-day free trial. We also have open the free QuickBooks Online sample company. If you want the two open at the same time, we suggest using Incognito window or another browser. You can open Incognito if using Google Chrome by selecting the three dots in the browser. Incognito window typing into the search engine. QuickBooks Online Test Drive. We're using the sample company to compare the account in view. The one Get Great Guitars is in to the business view. The one the sample company is in. You can change between the two views by going to the cog up top and switch the view on down below. We're going to open up and duplicate tabs like we do every time to put reports in. Right-click it on the tab up top to duplicate it. Right-click it on the tab up top to duplicate it. Going back to the tab to the middle as the tab to the right is thinking. Going down to the reports on the left and open up. Support Accounting Instruction by clicking the link below. Giving you a free month membership to all of the content on our website. Out by category further broken out by course. Each course then organized in a logical reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. One of the favorites, that's the balance sheet. By the way, if you're in the business view, the reports are located in the business overview on the left hand side and then the reports, that's where they're at. Let's go to the tab to the right so we can open the other favorite report on the left. That being the income statement, the profit and loss. Closing up the hand buggy and changing the range in from 010123 tab to let's go to 022823. I'm going to check this out on a side by side month by month comparison and then run it. We've got Jan, we've got Fed, we've got the total tab to the middle. Close up the buggy and change in the range in from 010123 to 022823. We're going to run it running and that's the setup process that we do every time. We're going to be processing payroll for the second month this time. So we process payroll on a monthly basis. Let's just kind of recap the flow of the payroll process. So I'm going to do that in our flow chart down below. So we're in the payroll basically like a vendor cycle. If it wasn't for all the complexities with taxes, then it would be basically shake hands with somebody. They would work for you or whatever and you pay them and you basically just pay them like a vendor. But we have a bunch of withholdings and whatnot which will change from place to place in the United States. We've got the federal and possibly state to deal with. So what we need to do then is possibly enter the time first if they're hourly employees. Although this time entry is not really required to process the payroll because you might be tracking time in some other way or you might be using an hourly, I mean a salaried type of system. But you can also use this time entry for the billing process as we've discussed in the past. Then of course we're going to process the payroll which will generate payroll checks which will be distinct forms different than other check forms in that they'll be marked off as like a payroll type of checks. We can determine which checks are payroll versus non-payroll type of checks and this will also generate the withholdings that are taken out of the employee checks and put into a liability account as well as calculate our taxes on the employer taxes and put those into a liability account and payroll taxes. Then of course at some point after that which we'll do shortly we'll have to pay the payroll liabilities for the withholdings that we took and our payroll taxes. We're also going to have to deal with the 941s that are quarterly information returns the 940 at the end of the year, the W2 and W3s at the end of the year. So that's the general process. Note if you're a bookkeeper or if you're doing your own business you could do this internally or you could hire someone to do it as a third party like an ADP or a paycheck. Those are the big ones and in that case you wouldn't have to do so much detailed tracking internally but you can have them do the detailed tracking and then you make the adjustments for your financial reporting so that at the least you can get your tax returns prepared properly at the end of the year and those are kind of the two main payroll options. So we turned on payroll in the system. I'm going to go back to the tab to the left because it was part of the free 30-day trial so we turned on the payroll. Payroll is a little bit difficult so if I go into the payroll and the overview up top it's a little bit difficult to follow along with the payroll in a practice problem because payroll is one of those things that generally needs to be run real time. So if you're working way out into the future for example as you're looking at this practice problem you might not be able to process payroll in exactly the same way. That's part of the problems with the payroll. Also just realize that the payroll will change from quarter to quarter so you usually want like a whole years of payroll in one payroll system. You don't really want to change payroll in the middle of the year. You can but it's not preferred because there's caps on things like social security and federal income tax so obviously when you do like the 941s or process payroll from one period to the prior period you compare it to the prior period that's what we always do with accounting but it'll change as the year goes as people hit some of these caps for like federal unemployment tax and social security and that kind of stuff. So just a couple things to keep aware of. So we're just going to go in we've set up the payroll the payroll set up. We've added our employees. We've got our two employees. We set up to be paying payroll on a monthly basis as opposed to weekly semi monthly and so on. And so now we'll just go up here and process the payroll. So I'm just going to run the payroll and hope that they'll allow me to run it even though I'm not in the real time here. So I'm going to hit the dropdown. This period by period has been set up when we set up the payroll so that the next period that we would run would be 2023. So February there we February 2023. There's the pay range the period because we have a monthly period. So it's the full month. The pay date happens to be the same day as the end of the period, which may not always be the case. You might have a pay date that's a little bit after the end of the period. So you have a little bit of time to process the payroll after the pay period. But we're going to keep the same date here to keep it in that second month that we're working on. And then if everything was laid out properly, you might be able to just process from here. But we need to go in and make some adjustments because of the practice problem. And so I'm going to go into Hamilton and actually that's going into his information stuff. I'm going to close that. I'm going to go into the pencil on the right hand side so I can see the calculation this way. So we've got the summary of the information. We've got the pay. He's a salaried employee. So this is the salaried amount. I'm going to pull out the trusty calculator here for some trusty calculations. Where's the calculator? It's not in the recent area. I've been using it all the time. So we're going to say this is going to be, I think it was 55,000 divided by 12. That's where the 4583, 55,000 a year. And then if I go into the employees, this federal income tax is one of the most confusing ones. We would populate it from tables and whatnot and the information that was populated in the W-4. But that's one of the things you're paying for for QuickBooks because it's not a flat tax. So that's one of the confusing ones to calculate. So I'm going to make a number up that matches our practice problem that's not coming from the W-4. I just wanted to match the numbers in our practice problems so it'll tie out to our bank reconciliations. Now the social security and Medicare should be easier because that's just going to be the 4583.33 times .062. I think is currently the calculation. So that's a nice, easy one to do because it basically is a flat tax although there is a cap. So if they get above the wage cap, this number will change. It'll be lower and that's what I mean about the payroll possibly being different from period to period as you go through the year. And then we've got the Medicare. We've got the 4583.33 times .0145. That gives us the 6646 about I'm not going to do any California tax because I want to make it kind of like a generic problem on the payroll side. And then you've got the employer taxes which are matching social security and Medicare. So and there would also be the federal unemployment tax which I didn't add because that's a much smaller tax. And again, I want to keep it kind of generic for our practice problem. So up top then if we think about this we've got this would be what they earned. This is what we're taking out of their earnings. These are in essence the mandatory withholdings for federal taxes. You could also have mandatory withholdings for your state and local taxes as for example, California might be but that will be changing from place to place. You can also have voluntary withholdings which might include things like health insurance 401k and that kind of stuff. We have a whole course that goes into at least setting that up and more detail. If you want to dive into that in more detail it's a whole thing in and of itself. And then down here we've got the employer taxes which are matching the social security. So what's going to be the transaction for this one employee as I go through it. Remember that you can think about the financial transactions. What's going to happen to the financial statements on an employee by employee basis or as though all employees were kind of like one employee. So if I was doing my payroll from a third party provider and entering them into my system I might think of all the transactions as one big employee and enter a journal entry or something like that into the system although I still need to reconcile the bank's accounts. But that's the way that you can think of it. If you're doing this stuff internally it's useful to think of it as one big employee what's the impact on the financials but you also need all this added detail so that you can provide what you need to the employees on the pay stubs and on the reports the 941s the 940 and W2s and W3s that's why it gets messy. So that means this is going to be a debit or an increase to the payroll expense and then all of this stuff is going to be decreasing or increasing a liability for the liability account and the difference between the two 4583.33.33 minus the 105.62 that's what's going to be decreasing the cash account and then down here this is going to be increasing the expense account for payroll expense, payroll tax expense and the other side is going to be increasing a liability account and then we'll have to pay off the liabilities in the future. Okay let's save that. Does that make sense? I think everything is proper. Okay so let's close that up and let's do this for Erica. Let's check out Erica. I mean I'm checking out her wages. Her wages. Don't sick the HR department on me. I am the HR department. We're payroll over here. I'm just looking at Erica's wages. So we're going to say Erica, let's say that Erica had hours of 360 and so update the timesheet hours. I'm going to say so it's trying to link to the timesheet because I put the timesheet on the payroll but I was basically using the timesheet to populate the information for the invoices more than pull it in for the purposes of the payroll. So I'm going to kind of discard the timesheet here. So that's going to give us 15. That's going to be then hold on a second. I'm going to put in here not 360. I'm going to put 160 and so that'll be 2400. Okay and then what we're going to withhold, I'm going to change this again. I know it's really high but I'm going to change it to 360 to tie it to our numbers in our practice problem and remove the California tax. So that means that the 2400 times .062, that's where they came out with that 14880 and the 2400 times the .1045 is where they come up with that 3480 and then we've got our match down here. So for this employee, the transaction would be when we record this, we're going to have, you can think of it first as a payroll check. So you might say well the payroll check is going to go, cash is going to go down by 2400, 2400 minus the 543.6. It's going to go down by that 185640 and then the other side is going to be payroll expense but it's going to go on there for the full amount of the 2400. The difference, the liability, this kind of sounds like sales tax maybe to you. The liability which is their taxes, the employee's taxes kind of like the sales tax is supposed to be the customer's taxes is going to go into the liability account for the liabilities and then we're going to pay taxes over and above. These are our taxes. So we have payroll expense, payroll tax expense for the 18360 and liabilities going up for that amount as well. So again, you can see that check by check and you can also see it in total. So if I was to think of both employees as one large employee, you could think of the transaction that way as well. Let me just double check these numbers. So that looks good and that looks good, I think. So remember payroll is one of those things you want to measure twice and cut once. You don't want to have to reprocess payroll generally because it's a pain to do that. You have to delete the paychecks generally to do that and run it again. So you can save it for later if you needed to go to coffee before processing but I'm going to go to the preview page. Let's do a preview and so we've got the preview information, the total payroll cost. Now if you were to do a transfer into like a payroll checking account which could be useful sometimes so that you have one checking account that just processes payroll then you might just transfer the money from your checking account to the payroll account and then process payroll out of it. That way if there's a problem with payroll you can have a checking account that just has payroll transactions in it which sometimes can be a little bit easier and this can be a spot where you could say okay now I'm going to transfer money into the payroll account so I can process payroll but we're just going to take it directly out of the checking account. Then down here we've got save for later again or submit payroll and we've got the preview. Let's go to the preview. It gives us a nice little report in essence of the information. So let's check it out. We've got Adam, we've got Erica and then we've got the net on the total. So this is kind of what I mean about us being able to see each employee as like group together one employee right because now I've got the salary for the both of them which is going to increase the payroll expense. We've got then the withholdings for all of them, the federal, the social security and Medicare. Those things are going to be increasing the liability and then the difference between those items which I believe is going to be the 4583.33 and plus the other pay of 2400 minus the 1060 minus the 432. Well, hold let me do that one more time. We've got the 4583.33 plus 2400 minus the 1060 minus the 432.96 minus the 101.26. That would be the net impact on the checking account but it would be done with two paychecks. So that's kind of the tricky thing. If you were thinking about it as just one lump sum, what's the impact because you got to do the bank reconciliations and the bank reconciliations are going to have two checks to tie out. And then you've got the employer portion of these two items that are going to be increasing payroll tax expense and the other side going to payroll liability. And they also have the summary down here which probably another an easier way to see it. This 6933 represents the 4583 and the 24, the 4583 and the 24. So this is the 6983.33 minus the withholdings minus the 1594.22 would be the impact on the checking account and then you've got the taxes for the employer side. All right, let's check it out. Enough of this submit. I can submit or say for later, let's submit it. Let's just do it, man. For crying out loud, just do it. Okay, so I think the next check number we were on was 1022. So I'm going to do that and then I'll just put this at 1023. Let's do that. Okay, and then if I check out the paystubs that we need to provide to the employees, we've got the information on it. I'm going to close this out and then close this out. And can I make this a little bit larger? Like so they changed the layout of my Adobe page. But here's our pay stub information on a paycheck by paycheck. So notice that you have to have the current information and the year to date information, what they actually earned and then what was taken out of and then what was taken out in order to get the net pay on the current pay and the year to date pay. So that's going to be that. So I'm going to close that back out and let's go ahead and finish. Finish him. So then take payroll off your to-do list. So let's say remind me later and then there it is. So now let's go to my check register and check out what happens. I'm going to go down to the, let's say the accounting on the left-hand side. And then I'm in the chart of accounts. And I can find that in the business view by the way. If you wanted to check it out on the business view, it's under the book. That's not the business view. The business view is here. And let's go to the bookkeeping and then the chart of accounts. That's where it's located there. You got to turn it on if you're in the sample company. And then I'm going to go into the check register. So if I go into the check register, there's our two checks that have been put in place. Now let's go to our financials. Going to go to the balance sheet, run it. And then if I zoom in a bit and we go down to the lia. Well, we've got the checking account obviously went down. Checking account went down here by the two checks that we wrote. And they're going to be payroll checks, especially marked payroll checks. Now that's for the net amount that it went down by after the withholdings. And then if I go back up and the other side is going to be on the income statement. So now you got the FEB payroll. The FEB payroll. So here's the wages. So if I go into that, this is the full amount, including not having taken out the taxes. And then we're going to go to the difference, which is going to be on the first balance sheet page where we have the liabilities down below. So now we've got the payroll liabilities. And so here's the federal. This includes both the employee and employer portions on the liabilities. And then going back up finally, we have our portion of the payroll taxes down here on the income statement, our portion of Social Security and Medicare. And it would include the federal unemployment tax, but that's a small tax so we didn't add it in our practice. So I'm going to right click on the tab to the right and duplicate. And let's just take a look at some of these sub ledger reports. You've got a whole host of sub ledger reports to help you to generate the information needed for the employees, as well as the payroll forms, the 941s, 940, W2s, W3s. So let's go to the reports on the left, close up the bookie and scroll down. So we've got our sales tax, employees, payroll reports. So here's all the payroll reports, a lot of information. So let's go to the payroll summary by employee. I think it's a good kind of registered type of report. So up top we've got just for 228. So this is the information for 228 now being broken out in terms of the gross pay. So you've got the gross pay total and then you've got Adam and then you've got Erica. And then you've got the withholdings on the total here. And then for Adam and Erica gives us the net pay, the impact on the actual checking account. So again, this is where it gets a little tricky when you think of it as a journal entry, because when you reconcile the bank accounts, it will show up as two separate checks. So if you record it in your checking account, just like when we use the undeposited fund or the clearing account or the payment to deposit accounts, if you record it as one lump sum, because you're recording it from a third party, for example, that did the payroll into the system, then you're going to have to be careful when you do the bank reconciliation for it, because obviously it's going to be multiple checks that you're reconciling to. And then you've got our portion, the Social Security and Medicare down here for the employer side. Let's try to change this to starting in January through the 28th and apply that out. So now we've got the gross pay at the $13,966.66. So let's see if that will tie out to the, that should tie out to our income statement. So if I run the income statement for the total for the two periods and run and roll down to wages, we're at the $13,966.66, right? So see how your payroll reports should basically tie into that. Now, some of the tax stuff isn't going to tie out because we made an adjustment last time in our practice problem to match out to the bank reconciliation. And that's where you need to be careful with the payroll because we did that for practice problem purposes, but you don't really want to do that in practice because this information is going to be used to make your information returns to the 940s, the 941, the W2s and the W3s. And what you want to have happen, of course, is for that information on those information returns, the information on the pay stubs and the information reflected on your financial statements to mirror each other, to be correct. You want to be able to double check them at the end of the year because if there's an audit or any kind of problem, everything should tie out. Usually when things don't tie out, it's not due to malice. It's not because there's someone's intentionally trying to mess something up. It's because they were trying to fix something and they did a workaround and instead of like deleting the payroll or adjusting the payroll items, they made like a journal entry to fix something or something like that. And now the payroll reports don't tie out to what's on the financial statement. And so that's what you need to be careful of. Everything works smoothly if the whole payroll system is set up properly and then you don't report anything else. Like if you reported something to a journal entry to this wages expense, that's going to clearly mess things up because it should only have stuff in there that's from the processing of the payroll. And if you post something to this and not do it through the payroll processing, it won't be reflected on the payroll reports. And the payroll reports are used to create the 940s, the 941s and the W2s and all that kind of stuff. So if there's a problem, we'll talk more about this next time. You really would like to, in practice, delete the payroll and reprocess the payroll instead of trying to fix it. That's why you want to do payroll basically right the first time because going back and fixing it usually means you've got to kind of start over and that can cause all kind of complications, especially if you already filed the 941s on the quarterly tax returns or something like that. Okay, enough with that. Let's go to the tab to the right. Let's take a look at our trial balance or trustee TB by going to the reports on the left-hand side. And then we're going to go down and just type in trial balance. Trial balance. And then we'll change that range up top from 010123 to 022823 and then run it. And let's do it side by side just for the fun of it because it is fun. It's good times. And if your numbers tie out to what we have, we're in the same spot. That's good. We're going to do a transaction detailed report at the end of the second month of data input to drill down on any differences.